It's been 10 years since Microsoft and Nvidia colaborated on a console development project, but a clause in the agreement between the two companies could still have ramifications for the GPU manufacturer. The company's recent FY 2011 report with the SEC states:
On March 5, 2000, we entered into an agreement with Microsoft in which we agreed to develop and sell graphics chips and to license certain technology to Microsoft and its licensees for use in the Xbox. Under the agreement, if an individual or corporation makes an offer to purchase shares equal to or greater than 30% of the outstanding shares of our common stock, Microsoft may have first and last rights of refusal to purchase the stock. The Microsoft provision and the other factors listed above could also delay or prevent a change in control of NVIDIA.
This isn't new information; NV's FY 2010 10-K (and presumably all the years previous) contained the same statement. The dusty old disclosure is attracting fresh interest thanks to the evolution of the market. With the Intel/Microsoft alliance splintering in the face of tablet-driven computing, there's talk that Microsoft could block a third-party acquisition bid for the GPU designer--or even buy Nvidia for itself.
This particular ship sailed ten years ago.
Such tidbits make for juicy gossip, but not much else. Even if Microsoft wanted an ARM development team, there are simpler ways to acquire one. Despite Nvidia's long-term goals, the vast majority of the company's revenue derives from GPU-related sales. Integrating the two companies would be a logistical nightmare; both Intel and AMD would likely argue that the deal violated antitrust legislation by handing Microsoft an unfair monopoly.
The open, licensed nature of ARM means MS has precious little reason to invest in its own hardware. It makes more sense for the company to explicitly *avoid* any hint of favoritism while stressing that its upcoming Windows 8 runs on as many ARM designs as possible.
Companies that choose to develop specific, dedicated silicon in-house typically do so because they have needs that aren't adequately met by existing mass-market options. Apple's A4/A5 processors are both bog-standard ARM Cortex processors without the variety of I/O blocks that typically accompany garden-variety implementations. Building chips without those blocks allowed Apple to trim CPU power consumption and further improve battery life.
Regardless of how popular its products are, Apple is just one company. Microsoft intends to market Windows 8 across a range of solutions, including future x86 processors. Any attempt to play both the hardware and software angles would raise huge red flags and likely sink the entire operation under a bog of red tape.